re: Dave Ramsey's advice to pay off a car loan, rather than invest

Maybe it’s just me, but the people I’ve steered toward’s Dave Ramsey’s advice are people who will likely never make it past step 1. One has filed bankruptcy at least twice that I know of.

It’s not my hope that they pay off debt the fastest. It’s my hope that they read testimonials from people who were in impossible situations and managed to get out and that they finally come to a decision to change their lives. I lose a lot of sleep when I have a family member that calls and tells me if I don’t pay their utility bill they’ll be in the dark.

I come off as an a-hole but I will never give them a dime. I have an open offer that whenever they are ready I will sit down and help them manage their finances. My offer has never been accepted. I’d consider it a great success if I could help them just live paycheck to paycheck and I could live without the guilt of watching someone live miserably.

I want them to be afraid of debt, to not take it on, but they love it. Credit to them is free money that they don’t plan on paying back. Can you imagine how difficult it is to deal with someone like that? They’re not used to seeing a positive account balance.

They’d be rich beyond their wildest dreams if they could only save $1,000 and complete step 1. I would hope that would be enough motivation to continue the steps.

Lastly, these types of people are not trying to make the decisions of paying off a car note at 3% vs a student loan at 5%. They’re dealing with late fees and reconnect fee payday loans with three digit interest rates. That’s where starting small to get your head above water can give you room to breathe.

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You are however using freshman algebra when you’re calculating the interest charged over time, which if you do correctly, you’ll realize that following Dave’s advice will leave you worse off and with more interest paid. That fact alone makes his advice bad.

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If you understood the time value of money / interest expense issues, you wouldn't be in that much debt in the first place.

His advice is not "bad". It is "realistic". These people can't afford to let perfect be the enemy of good.

We've spelled this out for you several ways. You may think another path is "better" but there is more than one way to skin a cat, etc.

Reality, the "right" path is the one that gets you out of debt that you have rung up on depreciable purchases.

Some people will never get it, yes, simple math shows that paying off high interest debt first will cause a person to pay less in interest, but human behavior has demonstrated that without the positive reinforcement of achieving small goals such as paying off a small debt first regardless of interest rate most people are unlikely to stick with a plan. So which really results in a person paying more interest, a plan they will never stick to causing them to remain in debt continuing to pay interest with no clear end in sight, or the plan that actually gets them out of debt with the cost of praying slightly more interest over a fixed period of time.

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It's like weight loss. If you set a goal to lose 80 pounds, even if that's what you "need" to lose, you will likely never get there. But if you set a goal to lose 5 pounds, you are likely to hit it, then set a goal to lose 10 pounds, hit that, etc.

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except you don't get fatter by losing a little bit of weight before you lose a lot of weight

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At this point, I'm just going to say you refuse to admit you are wrong, and move on.

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well the math says I'm not wrong soooooooo at this point, I'm just going to say you refuse to admit you are wrong, and move on.

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well the math says I'm not wrong soooooooo at this point, I'm just going to say you refuse to admit you are wrong, and move on.

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You are blaming a guy who helps people get out of debt, because he does it in a way that you don't agree with. You are latching on to 1 point in your favor, and ignoring the 99 points against you.

Your trolling is impressive, I'll say that.

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I'm not trolling anything or anyone, just pointing out how his system is flawed.

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It achieves the intended result, therefore, it is not flawed. You continue to ignore the non-financial issues at play here.

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over a longer that necessary timeline

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Assuming a perfect world with no curveballs during that time period.

Again, the math only works if you don't consider that inputs and variables are different for different people.

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You're doing the same thing, just only focused on the guy marketing his plans and books to those who have debt. I know he sells his other concepts too, and I take issue with those as well.

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No doubt DR is making a ton of money off of these people. It's why I cringe when he gets into his Jesus-mode.

But I know enough people, both personally and through my career, that struggled to get out of debt doing things such as "pay the highest interest rate first", and then when they started doing this program, they suceeded.

The difference between me and the other poster, is that if someone does a method such as "pay the highest interest rate first" and they succeed, I am very happy for that person. It's all about doing what is best for each person, what will work for each person.

Also, I think we are talking about his debt advice here. Dave's other advice, when it comes to investments especially, is really not his strong suit. In fact, it's pretty bad.

And his trusted local adviser program or whatever he calls it, is an absolute sham.

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False...the math works in my favor no matter how you slice it.

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Not if they fall off the wagon ...

...you aren’t wrong, just have to realize what/who you are working with.